Hot Topics

Chris Taylor, Ipreo’s EVP of Global Research, Thought Leadership & Partnerships, is back on the blog today to offer his thoughts on some hot topics currently making headlines…

Rock the Shareholder VoteA mid-season review of AGM results

Two directors of Chipotle survived a bout of shareholder indigestion and an ISS recommendation to not re-elect them at its recently concluded annual shareholders meeting. A third director opposed by Chipotle shareholder CtW Investment Group also survived the vote. Chipotle’s proxy access proposal, however, wasn’t as lucky as the three directors. A competing shareholder proxy access proposal (3%/three years) received close to 60% support beating out Chipotle’s management proposal, which had a tougher access requirement of 5% ownership and a holding period of five years. Proxy Access, Say-on-Pay and other governance issues have gotten the attention of the C-suite and boards across corporate America, not just Chipotle’s.

More than ever before, investor relations officers are collaborating with the GC/Corporate Secretary’s office to analyze their company’s exposure to a negative shareholder vote and even more importantly, directly communicating with governance teams at their largest institutional shareholders. Driven by this trend, Ipreo launched a Corporate Governance platform in 2015 that delivers critical data on institutional proxy voting, AGM meeting results and proxy contact information, so our clients can put together an informed analysis regarding shareholder voting tendencies and execute a communication action plan.

Context is always critical, and shareholder votes are not an exception. My colleague, Brian Matt, continually mines the data flowing through Ipreo’s Corporate Governance tool to review shareholder votes at the AGM’s of companies in the S&P 500. Click the image on the left for a detailed breakdown by proposal group and category of the vote results for the nearly 200 S&P 500 AGMs through early May 2016, compared to the same period in the prior year.

Some highlights:

Proxy Access Proposals: In a change from 2015, YTD, a majority (58%) of shareholder votes are now supporting management’s recommendation on access. That doesn’t necessarily indicate that shareholders are voting against access, but rather they are supporting either management’s version of access or management itself is in support of a shareholder’s proposal on access more frequently in 2016, due to more upfront negotiating by companies with shareholder proponents of access.

Compensation Proposals: Overall, shareholder support of management’s Say-on-Pay proposals has ebbed slightly from 2015, but still remains at a high level, 90.8%. Most other management proposals on compensation, including those on Executive and Director compensation, have seen a meaningful rise in year-over-year support. It appears that the advent of Say-on-Pay has focused boards on structuring and communicating compensation plans more effectively, and shareholders are voicing their approval.

Other issues to watch are those concerning shareholder rights, such as the right to act by written consent and the right to call a special meeting. Shareholder support for these proposals has increased slightly, but we have seen proposals at major companies, such as Boeing, Bristol-Myers, Colgate-Palmolive and Lockheed Martin, garner shareholder support of more than 35%.

Recently, the US Department of Labor finalized its rules on Fiduciary and Conflict of Interest Regulations that have been THE topic of conversation in the financial services sector. If you really want to dig into the new rules I recommend checking out this National Law Review piece.

While it’s still early days since the new rules were announced, and the markets breathed a small sigh of relief, as some view the DOL’s final rules to be a bit more balanced than expected, insurers and asset managers are going to be impacted.

To get an early read on the impact of these rules on asset managers, we thought it would be wise to get the opinions from….well, asset managers. Analysts on Ipreo’s Financials team in our Global Markets Intelligence (GMI) group got feedback from 15 buy siders on the new DOL rules. While not a consensus, many believe that low-cost index providers stand the best chance to benefit. Ugh.

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